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Tesla Vs GM’s Stock – Margins And Profitability

A Tesla super charger station. Image source: Flickr Image.

GM and Tesla are among the well-known industry players in the automotive sector, with both of them racing to develop the next generation of cutting-edge technology in the all-electric vehicle space.

Tesla and GM have been trying to win the EV race by spending billions of dollars on research and development, hoping to create not only better and longer-range electric vehicles but also the emerging self-driving technology.

That said, both companies’ stocks are worth buying and have their respective pros and cons when it comes to investing in their stocks.

This article compares both Tesla and GM’s stocks in several aspects, including vehicle deliveries, revenue growth, profitability and cash flow just to name a few and find out which company’s stock is a better buy.

Let’s go take a look!

Vehicle Sales Or Deliveries

Tesla vs GM in vehicle sales

Tesla vs GM in vehicle sales

* Vehicle deliveries data shown in the chart is presented on a TTM basis.
* Quarterly results are obtained directly from the respective company’s financial reports.
* Tesla and GM’s fiscal year begins on Jan 1 and ends on Dec 31.

Let’s first look at Tesla and GM’s vehicle deliveries results over the last 3 years.

Since both Tesla and GM are car manufacturers, vehicle deliveries results are crucial indicators of growth for both companies.

Moreover, vehicle deliveries are also closely correlated to financial well-being especially sales and revenue.

Therefore, vehicle deliveries can make or break an automaker.

That said, in terms of vehicle deliveries, GM’s TTM result came in at about 3.1 million while Tesla delivered only 800,000 vehicles as of fiscal Q3 2021.

As of fiscal 2021 Q3, GM’s vehicle delivery figure was nearly 4X higher than the number of Tesla.

While Tesla’s vehicle sales have been far fewer than that of General Motors, their figures have been in the opposite trend.

For example, GM’s vehicle deliveries have been declining while Tesla’s vehicle deliveries have been increasing in the last 3 years.

Between fiscal 2017 and 2021, GM’s vehicle deliveries have declined quite substantially, as much as 45% since 2017.

On the flip side, Tesla’s total vehicle deliveries have increased quite significantly during the same period.

Between fiscal 2017 and 2021, Tesla’s figures went from 100,000 to slightly above 800,000 as of Q3 2021, representing a growth rate of over 800% in the last 3 years!

Therefore, in terms of vehicle sales growth rates, Tesla definitely beats General Motors hands down.

Total Net Sales And Revenue

Tesla vs GM in total net sales and revenue

Tesla vs GM in total net sales and revenue

* Total net sales and revenue data shown in the chart is presented on a TTM basis.
* Quarterly results are obtained directly from the respective company’s financial reports.
* Tesla and GM’s fiscal year begins on Jan 1 and ends on Dec 31.

Similar to vehicle sales growth rate, total net sales and revenue growth rate is another important factor to consider when it comes to investing in Tesla and General Motors’ stocks.

As such, the above chart shows Tesla and GM’s total net sales and revenue for the period between fiscal 2017 and 2021.

Similar to the vehicle delivery chart, the revenue chart also shows an opposite trend for both Tesla’s and GM’s total net sales and revenue.

For example, Tesla’s total revenue has been on the rise while GM’s total revenue has been heading lower between fiscal 2017 to 2021.

From a TTM perspective, Tesla’s total revenue clocked at $47 billion USD as of fiscal 2021 3Q while GM’s total revenue reached $131 billion in the same quarter.

On a dollar-to-dollar basis, GM’s total revenue was nearly 3X higher than that of Tesla.

While GM’s revenue has been much higher, it has been on a decline year over year and reached one of the lowest as of fiscal 3Q 2021.

On the other hand, Tesla’s total net sales and revenue have been trending higher, up 300% since fiscal 2017.

Therefore, in terms of revenue growth, Tesla again beats General Motors by a mile.

Gross Profit Margin

Tesla vs GM in gross profit margin

Tesla vs GM in gross profit margin

* Gross profit margin data shown in the chart is presented on a TTM basis.
* Quarterly results are obtained directly from the respective company’s financial reports.
* Tesla and GM’s fiscal year begins on Jan 1 and ends on Dec 31.

Another factor that is just as important as all previously discussed factors when it comes to Tesla vs GM’s stock is the profitability factor.

The profitability factor that we are looking at here is the gross profit margin.

In this aspect, the higher the gross profit margin, the better the profitability is.

That said, from a GAAP basis, Tesla’s gross profit margin has been much better than that of General Motors as shown in the chart above.

Tesla’s gross margin was in excess of 20% in fiscal Q3 2021 while GM’s gross margin came in at only 12%.

At these figures, Tesla’s profitability was nearly twice as much as that of General Motors.

More importantly, Tesla’s gross profit margin has been on a rise since fiscal 2017 while GM’s figures have only been going higher since fiscal 2020.

Over the last 3 years, GM’s gross profit margin has remained flat, underscoring the reality that the firm’s profitability has not improved much since fiscal 2017.

Again, Tesla wins General Motors by several miles in terms of gross profit margin.

Operating Profit Margin

Tesla vs GM in operating profit margin

Tesla vs GM in operating profit margin

* Operating profit margin data shown in the chart is presented on a TTM basis.
* Quarterly results are obtained directly from the respective company’s financial reports.
* Tesla and GM’s fiscal year begins on Jan 1 and ends on Dec 31.

Another profitability metric that delves into Tesla and GM’s profitability that we should explore is the operating profit margin.

Similar to the gross profit margin, the higher the operating profit margin, the better the operating result is.

From a GAAP basis, Tesla and GM’s operating margins were nearly at the same level as of fiscal 2021.

For example, Tesla’s operating profit margin totaled 9.6% while GM’s figure was slightly lower at 8.1% as of fiscal 3Q 2021.

While GM’s operating profit margin has been in much better shape, Tesla’s results have been improving as reflected in the plot above.

Therefore, as of fiscal 3Q 2021, Tesla’s operating margin has surpassed that of General Motors for the second time since fiscal 2020.

On the other hand, GM’s operating margin has only been going up since fiscal 2020 and prior results had been nearly flat.

Therefore, from an operating perspective, both General Motors and Tesla were having nearly the same level of profitability.

Net Profit Margin

Tesla vs GM in net profit margin

Tesla vs GM in net profit margin

* Net profit margin data shown in the chart is presented on a TTM basis.
* Quarterly results are obtained directly from the respective company’s financial reports.
* Tesla and GM’s fiscal year begins on Jan 1 and ends on Dec 31.

Similar to the operating profit margin, GM’s net profit margin has been in much better shape than that of Tesla.

While Tesla’s net profit margin has been slightly lower, the figures have been on the rise, indicating that the firm’s net profit margin is fast closing in on that of GM.

As of fiscal 3Q 2021, Tesla’s net profit margin clocked at 7.4% compared to GM’s net profit margin of 8.4%.

Therefore, both GM and Tesla were having nearly the same level of profitability based on the net margin in fiscal Q3 2021.

More importantly, Tesla’s net profit margin has been rising fast and the firm has already managed to achieve the same level of profitability as that of GM since fiscal 2020.

Operating Cash Flow Margin

Tesla vs GM in operating cash flow margin

Tesla vs GM in operating cash flow margin

* Operating cash flow margin data shown in the chart is presented on a TTM basis.
* Operating cash flow margin is calculated based on the ratio of TTM net cash from operating activities to TTM revenue.
* Tesla and GM’s fiscal year begins on Jan 1 and ends on Dec 31.

From a cash flow perspective, Tesla seems to have a better result compared to that of General Motors.

As seen in the chart above, Tesla’s operating cash flow margin has been on a rise since fiscal 2017 and has exceeded 20% as of fiscal 2021 3Q.

Basically, Tesla has turned around from burning cash to being a cash cow.

On the other hand, GM’s operating cash flow margin has been quite steady and has only trended higher in recent quarters.

As of fiscal 3Q 2021, GM’s operating cash flow margin reached 11.5%, only half of what Tesla reported in the same quarter.

As a result, Tesla generates much better operating cash flow compared to General Motors.

Free Cash Flow Margin

Tesla vs GM in free cash flow margin

Tesla vs GM in free cash flow margin

* Free cash flow margin data shown in the chart is presented on a TTM basis.
* Free cash flow is the difference between net cash from operating activities and capital expenditures.
* Free cash flow margin is calculated based on the ratio of TTM free cash flow to TTM revenue.
* Tesla and GM’s fiscal year begins on Jan 1 and ends on Dec 31.

While GM generates more than twice the amount of free cash flow, its free cash flow margin was literally lower than that of Tesla as of fiscal Q3 2021.

In the latest quarter, GM’s free cash flow margin totaled only 6.7% compared to Tesla’s 8.8%.

Therefore, Tesla generates slightly better free cash flow than General Motors with respect to revenue.

Again, Tesla’s free cash flow margin also has been improving as seen in the chart above.

Basically, Tesla’s results have turned from negative to positive, indicating that the firm is now a cash-producing machine.

While Tesla’s free cash flow margin has been on a rise, GM’s results also have been growing in the last few quarters.

As a result, both companies’ free cash flow margins are only slightly different, illustrating that the strength of their free cash flow generation is nearly the same.

Dividends

Investors seeking income will consider dividends as an important factor when it comes to determining which company to invest in.

Speaking of dividends, income-seeking investors will be disappointed by Tesla’s non-dividend-paying policy.

In fact, Tesla has not paid a single dividend since its IPO in 2010 and will likely remain so in the foreseeable future. Read: Why doesn’t Tesla pay dividends?

While Tesla has not initiated any dividend-paying policy as of today, it does not necessarily mean that the company will do so forever.

It is still possible for Tesla to start paying dividends when the company’s fundamentals improve to the point that it makes loads of money.

On the other hand, General Motors has been a dividend-paying stock since 2014.

However, GM has temporarily suspended its dividend in Q2 2020, due mainly to the COVID-19 disruption to its businesses.

In general, General Motors as well as Ford has been badly affected by the recent COVID-19 outbreak.

As a result, both of them have suspended dividend payout in order to retain cash and liquidity.

While GM has not given any date on which it will start the dividend payout again, in my opinion, GM will most likely resume the cash dividend when the economic outlook improves.

For your information, GM has suspended its dividend prior to 2014 due to a bad business environment but has brought back the dividends once the company’s business regained its footing in 2014 and has not missed a single quarter of dividend payment since then.

Additionally, GM just announced a tremendous recovery since the 3rd quarter of 2020 in terms of total vehicle sales and revenue growth compared to the prior quarter.

If GM’s fundamental as well as business outlook continues to improve in subsequent quarters, the company may resume the dividend payouts as early as 2021.

For now, there is no winner in this comparison since both companies do not pay a dividend.

Not until GM reinstates its cash dividend, the company will remain as a non-dividend paying company.

Summary

Overall, we can see that Tesla’s stock is growth-oriented whereas GM’s stock is income-oriented.

Tesla has been showing growth in most areas, including vehicle sales, revenue, profitability and cash flow.

On the other hand, GM’s profitability and cash flow have been steady and have maintained roughly at the same levels in the last 3 years.

As of fiscal 2021, we can see that Tesla has overtaken General Motors in many areas especially in profitability metrics, including gross margin, operating and net profit margin.

In terms of cash flow margin, Tesla’s operating cash flow margin also has surpassed that of GM since fiscal 2020, meaning that Tesla generates much better operating cash flow with respect to sales.

Since GM has not reinstated the cash dividends as of fiscal 2021, income investors will be disappointed with the company’s non-dividend policy.

As a result, Tesla’s stock is superior compared to GM’s stock due to the company’s strength in profitability and cash flow margins.

Not to mention Tesla’s potential growth as a result of the expanding electric vehicle market.

In short, Tesla’s stock makes a much better buy now compared to GM’s stock.

References and Credits

1. All financial data and numbers in this article are obtained and referenced from General Motors’ and Tesla financial statements available in: GM SEC filings and Tesla SEC filings.

2. Featured images in this article are used under Creative Common licenses and obtained from the following source: Alpha and Marco Verch.

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Disclosure

The content in this article is for informational purposes only and is neither a recommendation nor a piece of financial advice to purchase a stock.

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